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European Union Considerations on Diligence Law for Corporate Supply Chains

Large companies operating in the European Union may be held accountable for environmental or human rights violations by businesses in their supply chains, under a proposed new law on Wednesday by the European Commission, the bloc’s administrative body.

“We cannot turn a blind eye to what happens in our value chains,” said Didier Reynders, justice commissioner for the European Union.

Under the law, known as due diligence legislation, businesses will need to establish regulations to detect, prevent and mitigate human rights abuses, such as child labor, as well as environmental hazards in the workplace. their supply chain. National governments will determine financial penalties for companies that violate the rules.

Victims can sue for compensation in the domestic courts of EU member states, even if the damage occurred outside the bloc.

The new rules proposed by the commission come after a number of member states, including Germany and France, introduced different versions of the verification law at the national level.

The legislation will now be discussed by the European Parliament and 27 national governments, with all parties able to amend the language. The final draft will require EU legislators and member states for approval. The whole process can take a year or more.

The initial proposal would apply to companies with more than 500 employees and an annual turnover of more than 150 million euros (about $170 million), a group that includes around 10,000 EU businesses, about 1% of the total. number. Some 2,000 companies with headquarters outside the bloc but doing business in the European Union with an annual turnover of more than 150 million euros will also be covered. After two years, the scope will be expanded to include smaller businesses in so-called high-impact sectors, such as textiles, food products and mining.

Businesses expressed concern about this proposal.

Pierre Gataz, president of BusinessEurope, a trade organization, said: “It is unrealistic to expect that European companies can control their entire value chain around the world. “Ultimately these proposals will harm our companies’ ability to remain competitive worldwide.”

But Richard Gardiner of Global Witness says the law has the potential to become “a pivotal moment for human rights and the climate crisis,” if the European Union rejects efforts to ease the proposed measures.

We’ve been investigating large corporations for decades, and when we reveal the harm they cause to people and the planet, the answer is always the same: “We don’t know,” Mr. Gardiner said. . “Today’s proposal from the committee could make that response illegal.”

But some analysts remain skeptical, pointing out that the commission’s final proposal, which has been repeatedly delayed, is far less ambitious than what was originally planned.

“This result is the result of unprecedented corporate-level lobbying,” Alberto Alemanno, professor of European Union law at the HEC Paris business school. The end result, he said, “was demoted to another narrow piece of tick-the-box compliance.”

Julia Linares Sabater, a senior official at WWF’s European Policy Office, said that affected businesses “represent a drop in the ocean of the total EU economy.”

She added: “The EU needs to be more ambitious to successfully tackle the climate and biodiversity crises.

https://www.nytimes.com/2022/02/23/business/economy/eu-supply-chain-violations.html European Union Considerations on Diligence Law for Corporate Supply Chains

Fry Electronics Team

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